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Is AlcaLu Seeking a New CEO?

Ray Le Maistre
4/29/2008

The Alcatel-Lucent (NYSE: ALU) board is believed to have begun its search for a new CEO to replace Pat Russo. Ben Verwaayen, the outgoing CEO of BT Group plc (NYSE: BT; London: BTA), has been identified as one of the best qualified potential candidates, according to Light Reading sources and a French business newsletter. (See Verwaayen Set to Leave BT.)

Late last week French online business newsletter La Lettre A reported that AlcaLu has initiated the recruitment process, with Verwaayen identified as one candidate that fits the equipment giant's needs.

Light Reading sources also believe that the search for a new CEO has begun, and agree that Verwaayen would be a prime target for the giant equipment firm, though they also believe that a number of French executives with the relevant experience will be approached. Once source cited former Orange (NYSE: FTE) CEO Thierry Breton as another potential target. (See France Telecom's Got a New Chief.)

The sources, who wished to remain anonymous, say pressure from investors to replace Russo has intensified: Since the company was formed by the merger of Alcatel and Lucent in late 2006, investors have seen the value of their shareholdings drop by 56 percent following a string of disappointing quarterly reports and profit warnings. (See AlcaLu Reports Q4 Loss of €2.6B, AlcaLu Cuts 4,000 More Jobs, AlcaLu Cuts 2007 Outlook by $1.25B, Alcatel-Lucent Slumps on Q2 Loss , and Merger Tears Into AlcaLu's Sales.)

On its first day of trading, Dec. 1 2006, AlcaLu's share price stood at €10.12 -- today it is trading on the Paris exchange at €4.39.

In addition, some investors are believed to be frustrated that the company's top management team has not been injected with any new blood: When the company reshuffled its executive structure and Carrier Group in late October 2007, Russo shuffled the existing management pack, but did not recruit any outsiders. (See Russo Shakes Up AlcaLu's Top Team and AlcaLu Revamps Its Carrier Business.)

Alcatel-Lucent declined to comment on whether a CEO recruitment process had been initiated, stating that it doesn't comment on rumor and speculation.

This whole process is believed to be in its early stages, say sources. Verwaayen, who is set to leave BT at the end of May, has been cited as a prime target by at least one source, though another says there hasn't to date been any buzz inside AlcaLu about the BT man as a potential future leader.

Verwaayen's office at BT declined to comment on whether he has been approached about the post.

The chatter about AlcaLu's recruitment processes comes just as the company is set to announce its first quarter results, which are expected to show yet another loss. The vendor is to issue its earnings report early Wednesday, April 30.

Verwaayen targeted?
Apart from being available, now that he is clearing his desk at BT, why would Verwaayen be regarded as a decent candidate to take the helm at AlcaLu? The industry sources contacted by Light Reading say the straight-talking Dutchman is ideally suited to the job for two main reasons.

First, he has proven himself capable of turning around the financial fortunes of a telecom company -- BT was in dire straits when he took over in 2002, but has prospered under his leadership.

Second, Verwaayen has "history" with the vendor, having been a senior executive and the vice chairman of Lucent, with responsibility for global marketing, sales, and services, in the four and a half years prior to his appointment as BT's CEO in late 2001. (See BT Snares Lucent Exec and Lucent Streamlines Management Team.)

Before he left Lucent he was believed to have been one of the lead candidates to become the vendor's CEO, but was passed over by chairman Henry Schacht, in favor of Russo. (See Lucent's Next Leader.)

Of course, this isn't the first time that talk about Russo's tenure as AlcaLu CEO has emerged. In early October last year, media reports that Russo's position was under threat were rife, but the board issued a statement backing her and her team. (See AlcaLu Board Backs Russo.)

— Ray Le Maistre, International News Editor, Light Reading

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bollocks187
bollocks187
12/5/2012 | 3:42:06 PM
re: Is AlcaLu Seeking a New CEO?
One hated CEO for another hated CEO.
Stevery
Stevery
12/5/2012 | 3:41:59 PM
re: Is AlcaLu Seeking a New CEO?
Alcatel Lucent? Didn't they used to make networking equipment before they imploded?

At this point, most of the major carriers would probably shun Lucatel out of shear loss of confidence. Not only do they have a CEO that is running the ship into the ground, but the board-of-directors has failed to act in any reasonably timely fashion.

And just what idiot would take over and lead this mess?

You want to turn this company around? Lop off the first 4 layers, starting at the BoD. Maybe keep one person from those layers. Split the rest into sensible divisions and sell it off.
FbytF
FbytF
12/5/2012 | 3:41:59 PM
re: Is AlcaLu Seeking a New CEO?
"it doesn't comment on rumor and speculation." is the same comment used when the merger speculation started, ergo the CEO search rumor must be true. Otherwise there would have been statements of denile flying.

"One hated CEO for another hated CEO." as I recall Ben didn't lose 49% of the value of BT did he?
Kreskin
Kreskin
12/5/2012 | 3:41:58 PM
re: Is AlcaLu Seeking a New CEO?

Hey Light Reading ... you call this news ... before the merger it was only a matter of when and not if Russo would get the boot ... it's 2008, you need to get current ... even when she gets the boot it is not news ...
madcow
madcow
12/5/2012 | 3:41:57 PM
re: Is AlcaLu Seeking a New CEO?
I am not a specialist in this matter, but reading the statuts (excerpts from SEC info web site below), thre is a requirement that two-thirds of the 14 directors must vote to oust Ms. Russo as CEO or Serge Tchuruk as chairman. Ms. Russo would have to lose the support of at least two of Lucent's six appointees -- on top of all of Alcatel's six appointees and the two independents -- to lose her job. So on this basis I have the impression (Am I right?) that Ms Russo and Mr Tchuruk will keep their current job until at least april 2009. Unless of course they decide by themselves (or someone finds a good reason $$$ to convince them) to leave the company. Again, I am not a specialist. What do you think ?

"Until the third anniversary of the effective date of the merger, as contemplated by the agreement of April 2, 2006 (...) , management of the Company will be performed by the CEO unless the Board of Directors decides, by the affirmative vote of at least two-thirds of the directors then in office, that management of the Company will be performed by the Chairman of the Board of Directors." (...)
"From and after the third anniversary of the effective date of the merger, the Board of Directors may deliberate on the matter of whether management of the Company shall be performed by the CEO or the Chairman of the Board of Directors only if at least two-thirds of its current members are present. If it has been unable to deliberate because the required quorum is not present, the Board of Directors must meet a second time to deliberate again"
DCITDave
DCITDave
12/5/2012 | 3:41:57 PM
re: Is AlcaLu Seeking a New CEO?
You're right, and provisions like that help the board keep the company stable. But a CEO of a much smaller company told me once that, no matter what your contract says, you can go at any time, depending on how bad the board and investors want you out.

I guess it could be possible that Ray's story is right, but the intent of the board hunting for a new CEO now is simply to get ahead of the contract expiration. These searches can sometimes take a while.

ph
madcow
madcow
12/5/2012 | 3:41:55 PM
re: Is AlcaLu Seeking a New CEO?
Agree with you Phil, and any way, even april 2009 is not very far from now if they want to have a smooth transition. It will be interesting to follow their reorgs and announcements...
NeuronHammer
NeuronHammer
12/5/2012 | 3:41:48 PM
re: Is AlcaLu Seeking a New CEO?
Either "instead of" or "additionally" some lower-level management people should be thrown out as well. How many projects have been canceled after buttering hundreds of millions down the drain for absolutely ridiculous stuff that should have either been stopped way earlier or for intelligent and good projects that got canceled due to dullness or which were stopped due to merger-related things ? Who bought start-ups just before the merger and then threw out 95% of their staff ? Riverstone anyone ? Was his name Ken Worth-less ?

However, the amount of untalented and incapable managers down to the lowest managing level on the various sites is beyond imagination. It's not only Pat, but also half-assed people below her.

And a company that doesn't allow the Optical department to develop an IP-based system as this is only allowed by the IP-division (so the optical system always has to incorporate old TDM/WDM, never being capable to compete against the likes of Cisco in price) is a joke by itself.
corwin0
corwin0
12/5/2012 | 3:41:39 PM
re: Is AlcaLu Seeking a New CEO?
Actually, the issue is not the fact that they hinder the optical division from producing IP (actually, the optical division, as far as I know doesn't WANT to do IP, they want to do more Ethernet and MPLS/L2VPN services), as having multiple different code trains and packet processors (and then supporting, maintaining them, etc. becomes somewhat painful.

What is absurd is that these divisions are still separate (which encourages internal warfare) when most of the industry understands that convergence has already happened. It's a bit hard to converge when two business units service different parts of that converged cloud.

Not that it's not possible, but someone with a heck of a lot more vision in the executive levels needs to be there to make people play nice with one another. In other words, its beyond AlcaLu to do so.
madcow
madcow
12/5/2012 | 3:41:33 PM
re: Is AlcaLu Seeking a New CEO?
FYI - I have just crossed this

"A two-thirds majority of the board is required to remove the CEO, and the board comprises five former Alcatel directors, five former Lucent board members, plus two independent directors. This will shortly change. *** At the annual meeting on May 30, the company bylaws will be amended so that a simple majority of board directors can remove the CEO" ***.

source: "Mean Street: What Alcatel-LucentGÇÖs Pat Russo Can Learn From Spock", Ewan Newmark, Wall Street Journal, http://blogs.wsj.com/deals/200...
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